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2016 (7) TMI 1264 - AT - Income TaxRevision u/s 263 - loss on account of foreign exchange fluctuation claimed - conclusion of the CIT in the impugned order that the loss in question is on account capital item - Held that:- The assessee gave a detail explanation as to how loss on account of fluctuation of foreign exchange on repatriation of proceeds on issue of FCCB was in the nature of loss and how the claim for deduction made by the assessee was admissible. It is clear from the submissions made by the Assessee that at the time of remittance of money in India, received from issue of FCCB, the dollar value fell from ₹ 45.55 to ₹ 39.37. Due to fall in the rupee value, the amount in the bank account had to be reinstated at the rate of ₹ 39.37. It is also not disputed that the transaction was settled during the year under consideration. As per Accounting Standard -11 "The effects of changes in Foreign Exchange Rates", the exchange difference has to be recognized in the profit and loss account. Hence, the above loss being a realized loss was claimed to be allowable as deduction while computing Total Income. As in the case of Mahindra & Mahindra 2009 (10) TMI 639 - ITAT MUMBAI ) though FCCB were convertible into shares at a later point of time, they were in the nature of loan at the time of their issue till conversion and any expenditure incurred in connection with issuing FCCB would be admissible as a revenue expenditure. This principle has been extended to be applicable on account of fluctuation of foreign currency in respect of foreign currency convertible bond FCCB in the case of Mahindra and Mahindra Limited [supra]. The AO even though has not mentioned the submissions of the assessee in this regard, has nevertheless not made any disallowance of loss on account of foreign exchange fluctuation claimed by the assessee. The conclusion in such circumstances is that AO was satisfied with the claim of the assessee for deduction of the aforesaid sum. It may be that contrary view may also exist on the issue. The view taken by the AO is a possible view and the CIT in exercising of powers cannot seek to substitute his view with that of the AO. - Decided in favour of assessee
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